Web-driven financial institutes urge for relief from TDS Bonds
In the lead-up to Budget 2024, online bond platform providers (OBPPs) in India are advocating for significant reforms to enhance retail investor participation in bond markets.
One of their key proposals is the removal of Tax Deduction at Source (TDS) on corporate bonds, which they argue would reduce compliance burdens for issuers and make investments more attractive to investors. Vijay Kuppa, CEO of InCred Money, highlighted that eliminating TDS on corporate bonds would enhance investor friendliness and facilitate more accessible access to these financial instruments. Additionally, OBPPs are pushing to integrate the Reserve Bank of India’s (RBI) Retail Direct Platform with their services. This integration would enable retail investors to directly invest in government bonds through online platforms directly, thereby democratizing access to these investments. Abhijit Roy, co-founder of GoldenPi, emphasized the importance of allowing retail investors to apply for Government Securities (G-Secs) via bond platforms and RBI’s Retail Direct platform to streamline the investment process.
The Finance Bill 2023 has already made strides by omitting specific clauses under Section 193 of the Income Tax Act, which previously exempted TDS on interest payments for listed bonds. However, challenges remain, as highlighted by Anshul Gupta from Wint Wealth, who pointed out discrepancies in TDS deductions affecting the secondary market trading of bonds. This issue underscores the need for more precise tax regulations to promote liquidity in bond markets. Looking ahead, Tirth Shah, Founder of The Fixed Income.Com, proposed additional tax deductions under Section 80C to incentivize more significant bond retail investments. This move could stimulate broader participation and deepen the corporate bond market in India. Nikhil Aggarwal, CEO of Grip Invest, echoed the sentiment, stressing the importance of tax parity across different investment avenues to foster a more robust fixed-income market. OBPPs urge the government to adopt reforms that will simplify regulatory frameworks, enhance investor confidence, and promote more comprehensive access to bond investments. These measures aim to bolster retail participation and contribute to the overall development of India’s financial markets.
